How can The Body Shop compete in the U.S. market and retain its influence in the cosmetics industry despite threats like fiercer competition, apparent weaker competitive advantage, and the inevitable change in leadership?
II. Case Facts and Background
The Body Shop has been a fast-growing company in the cosmetics industry. Anita Riddick, the founder and managing director of the company had the habit of going against the tide of the industry’s established practices. It did not advertise, avoided traditional distribution channels, spent as little as possible on packaging, and used product labels to describe ingredients rather than to make miraculous claims. From a single storefront in 1976, it had grown to 576 shops by 1991, trading in 38 countries and 18 languages. But in the early 1990s, some began wondering if the The Body Shop’s phenomenal run of success was fading.
With its entry in to U. S. Market , observers wondered whether it cold maintain its phenomenal growth. They pointed to the fact that sales in the United Kingdom, which represented 67% of the company’s total, had grown by only 1%, after inflation and new store openings had been removed from the 1990 figures. Although the $12 billion U. S. cosmetics market clearly represented the company’s greatest growth opportunity, Gordon Roddick, Anita’s husband, was particularly nervous about entering what had been described as “graveyard for British retailers.” It was Gordon’s view that while the United States offered the The Body Shop the greatest potential for growth, it also represented the greatest potential for disaster.
In 1988, The Body Shop’s first branch in U. S. was opened in Morristown, New Jersey. Under the direction of a British expatriate, twelve company-owned shops were opened on the East Coast. Total investment exceeded £10 million. In mid-1990, the company began franchising and by year’s end, 37 shops had been opened. By 1990, U. S. sales were £5.8 million, or 7% of total revenues. But the question was, “Were the company good enough?” Due to the high cost of the initial infrastructure, however, the U. S. operations were still running at a loss.
Whether these initial losses would continue or indeed, whether stores remained open, dependent on how the company dealt with a different set of challenges. First, environmental concern had been less of a pubic issue in the United States during the 1980s, and it was not certain that The Body Shop’s strong image and unfamiliar practices would appeal to them. Roddick learned how difficult it was to transfer her values even within her organization. It was hard to recruit staff who embraced Body Shop values and could not fit into what she called “our quirky, zany, organization.” She was also amazed by how constrained business was in a country that epitomized the free enterprise system. The Food and Drug registrations, the various state and city regulations, and the lawyers horror stories all made Roddick nervous about her decision. Furthermore, some experts questioned whether The Body Shop’s resistance to advertising would limit growth in the communications-intensive U. S. market. Finally, The Body Shop’s global success had not gone unnoticed in the cosmetics industry. Betting that the “green consumer” population would continue to grow, many leading firms were introducing “natural” lines, and revamping the look and the marketing pitch of their products. Some analysts felt that the company had outgrown its historical strategy, organization, and event its leadership. Could the company adequately defend itself against the wave of new competition without restoring to advertising?
1. Discuss and evaluate the current marketing and leadership strategies of The Body Shop.
2. Evaluate whether the company should venture into advertising as it enters the U.S. market.
3. Propose marketing...